CSEA

Thursday, August 2, 2012

Wages aren’t stagnating, they’re plummeting

By Dylan Matthews , Washington Post: July 31, 2012
Many economists have expressed concern that median wages have stagnated since the 1970s, as illustrated in the following chart from the Economic Policy Institute. …. As you can see on the black line in the above graph, median earnings for men in 2009 were lower than they were in the early 1970s. And it gets worse. The decline shown above is actually too mild, because it doesn’t take into account the massive exodus from the workforce of men since that period. Between 1960 and 2009, the share of men working fulltime fell from 83 percent to 66 percent, and the share not making formal wages tripled from 6 percent to 18 percent.

… For three years, city governments have been shrinking their workforces. Most communities pay their municipal employees and fund their schools and other services using tax revenues and fees collected for licenses and other things. … The resulting cuts in local government have subtracted almost one-quarter of a percentage point from annual gross domestic product (adjusted for inflation) each of the past four years, Moody's Analytics estimates. The total impact during that period: about $150 billion. Moreover, the cuts have accelerated over the past year, according to Moody's. … "A lot of the private sector depends on the public sector," says Chris Hoene, director of research and innovation at the National League of Cities in Washington. "There are estimates that for every $3 spent at the municipal level, there is $1 in new private-sector activity."

Six months from now, the U.S. economy is poised to fall over a fiscal “cliff” and into another recession, resulting in the loss of an estimated 2 million jobs and pushing the unemployment rate back over 9 percent, according to several government, private, and academic analysts. However, forecasters do not expect this worst-case scenario will actually happen, instead predicting Congress will intervene later this year to prevent the automatic federal spending cuts and expiration of income tax cuts from occurring.